January 14, 2020

Court Rules ACA Individual Mandate Unconstitutional

The U.S. Fifth Circuit Court of Appeals has upheld a lower court’s decision that the individual mandate portion of the Affordable Care Act is unconstitutional because the penalty was set to zero in 2017.

However, the fate of the entire law is still in play after the court remanded the question of whether that means the entire ACA should be declared void back down to the district court.

Proponents of abolishing the ACA say that its lack of a “severability provision” means that if any element of the ACA is found unconstitutional, the entire law must go. However, that would likely create chaos for the health insurance marketplace.

Two of the three judges on the court on December 18 upheld a lower court’s decision that the individual mandate is not constitutional because it cannot be construed as a tax.

The judges wrote: “The individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power. On the severability question, we remand to the district court to provide additional analysis of the provisions of the ACA as they currently exist.”

The decision prolongs the court process and ensures that the future of the landmark health care law remains uncertain.

There is much at stake in this case. If the entire law is thrown out by courts, it would reverberate through the health care industry, including insurance providers and hospitals, and put the coverage of millions of Americans at stake.

The decision would affect people who buy coverage in the individual market and those with coverage through Medicaid expansion, Medicare and from their employers.

The ruling that the individual mandate is unconstitutional will be appealed to the U.S. Supreme Court by the 20 Democratic states that are now defending the ACA in this court fight against republican states that filed the suit to abolish the law on the grounds that it is unconstitutional.

Some background

The ACA individual mandate provision ― or “individual shared responsibility” provision ― initially required many people to own what the government classifies as solid major medical coverage, or else pay a penalty. Congress passed a tax bill in 2017 that included a provision setting the penalty at zero.

ACA critics challenged the mandate through a case that reached the Supreme Court in 2012.

In a ruling on that case, the Supreme Court held that a federal law that blocks challenges to new taxes protected the individual mandate provision, because the penalty was a tax.

Critics of the provision say that, now the new tax law has set the individual mandate penalty at zero, the individual mandate is no longer a tax and can no longer benefit from the legal protection accorded to federal taxes.

The takeaway

Because of this ruling, the lower court will likely start hearings on whether the entire law should be thrown out based on the elimination of the penalties for not securing coverage.

The other part of the ruling, that the individual mandate is unconstitutional, is destined for appeal to the Supreme Court. It’s unlikely that it would be heard in 2020 and that the issue about the fate of the rest of the law will take years to wind its way through the courts.

January 9, 2020

New Rules Allow Employers to Reimburse for Health Premiums

Starting Jan. 1, 2020, employers can establish accounts for their employees to help them pay for individual health insurance policies they purchase, as well as for other health care expenses.

A new regulation expands on how health reimbursement accounts can be used. Currently, employers and their workers can contribute to these accounts, which can be used to reimburse workers for out-of-pocket medical expenses.

With these new Individual Coverage HRAs, employers can fund the account workers would use to pay for health insurance premiums for coverage that they secure on their own.

Up until this new regulation, such arrangements were prohibited by the Affordable Care Act under the threat of sizeable fines in excess of $36,000 per employee per year.

This rule is the result of legislation signed into law by President Obama in December 2016, which created the “qualified small employer health reimbursement arrangement (QSEHRA),” which would allow small employers to reimburse for individual insurance under strict guidelines.

The Trump administration was tasked with writing the regulations, which created the Individual Coverage HRA (ICHRA).

How it works

Under the new rule, if an employer is funding an ICHRA, the plan an employee chooses must be ACA-compliant, meaning it must include coverage for the 10 essential benefits with no lifetime or annual benefit maximums — and must adhere to the consumer protections built into the law.

Once the ICHRA is created, the employer will a set amount every month into the account on a pre-tax basis, which the employee can then use to buy or supplement their purchase of health insurance benefits in the individual market.

The law allows employers to set up as many as 11 different classes of employees for the purposes of distributing funds to ICHRAs. The employer can vary how much they give to each different group. For example, one class may get $600 a month per single employee with no dependents, while members of another class may receive $400 a month.

The allowable classes are:

Full-time employees — For the purposes of satisfying the employer mandate, that means a worker who averages 30 or more hours per week.

Part-time employees — Like the above, the employer can choose how to define what part-time is.

Seasonal employees — Workers hired for short-term positions, usually during particularly busy periods.

Temps who work for a staffing firm — These employees provide temporary services for the business, but are formally employed through a staffing firm.

Salaried employees — Staff who have a have a fixed annual salary and are not typically paid overtime.

Hourly employees — Staff who are paid on an hourly basis and can earn overtime.

Employees covered under a collective bargaining agreement — Employees who are members of a labor union that has a contract with the employer.

Employees in a waiting period — This class would include workers who were recently hired and are in their waiting period before they can receive health benefits (in many companies, this is 90 days).

Foreign employees who work abroad — These employees work outside of the U.S.

Employees in different locations, based on rating areas — These employees live outside the individual health insurance rating area of the business’s physical address.

A combination of two or more of the above — Businesses can also create additional classes by combining two or more of the above classes.

The rules for ICHRAs are as follows:

  • Any employee covered by the ICHRA must be enrolled in health insurance coverage purchased in the individual market, and must verify that they have such coverage (as mentioned above, that coverage must be ACA-compliant);
  • The employer may not offer the same class of workers both an ICHRA and a traditional group health plan;
  • The employer must offer the ICHRA on the same terms to all employees in a class;
  • Employees must be allowed to opt out of receiving an ICHRA;
  • Employers must provide detailed information to employees on how the ICHRA works;
  • Employers may not create a class of employees younger than 25, whom they might want to keep in their group plan because they’re healthier;
  • A class cannot have less than 10 employees in companies with fewer than 100 workers. For employers with 100 to 200 employees, the minimum class size is 10% of the workforce, while for employers with 200 or more staff, the minimum size is 20 employees;
  • While benefits must be distributed fairly to employees that fall within each class, each class can be broken down further by age and family size. That means employees with families can be offered a higher amount per month and rates can be scaled by age.
December 30, 2019

Study Attributes 25% of Health Spending to ‘Waste’

A new study published in the Journal of the American Medical Association estimates that about 25% of all health care spending in the U.S. is attributable to waste in the system.

The study, conducted by health insurer Humana and the University of Pittsburgh School of Medicine, estimated that between $760 billion to $935 billion of health care spending in the country is wasteful.

The study is eye-opening and reflects the need for new approaches in the health care system and how medical care and pharmaceuticals are paid for. It also reflects the tremendous waste caused by complex administrative procedures, which again cries out for changes in the health insurance and care delivery models.

The researchers identified wasteful spending in the following six areas:

Failure of care delivery: $102.4 billion to $165.7 billion

Failure of care coordination: $27.2 billion to $78.2 billion

Overtreatment or low-value care: $75.7 billion to $101.2 billion

Pricing failure: $230.7 billion to $240.5 billion

Fraud and abuse: $58.5 billion to $83.9 billion

Administrative complexity: $265.6 billion

“This study highlights the opportunity to reduce waste in our current health care system,” William Shrank, MD, lead author and Humana’s chief medical and corporate affairs officer, said in a prepared statement. “By focusing on these opportunities, we could make health care substantially more affordable.”

With that much waste in the system, the industry is crying out for more efficiency in hospitals, medical services delivery, health insurance and administration across the spectrum.

The researchers said that if the industry worked on concrete solutions, it could reduce waste by up to $282 billion a year.

They identified the most promising areas for reducing waste, and said that value-based care and reimbursement models represent a major opportunity to reduce the greatest source of waste: administrative complexity.

Value-based care

They said that value-based care models could improve administrative coordination in the system, which is currently severely lacking. The researchers wrote:

“In value-based models, in particular, those in which clinicians take on financial risk for the total cost of care of the populations they serve, many of the administrative tools used by payers to reduce waste (such as prior authorization) can be discontinued or delegated to the clinicians.”

That, they said, would reduce complexity for physicians and give them incentives to reduce waste and improve value in their treatment decision-making.

Using value-based care in which all parties share some in the financial risk would benefit insurers, employers who sponsor health insurance for their workers, hospitals, doctors and patients.

More and more insurers are experimenting with value-based care, which is primarily a payment model that offers financial incentives to physicians, hospitals, medical groups and other health care providers for meeting certain performance measures.  Essentially, they are paid based on patient health outcomes.

Value-based care differs from a fee-for-service or capitated approach, in which providers are paid based on the amount of health care services they deliver. The “value” in value-based health care is derived from measuring health outcomes against the cost of delivering those outcomes.

Other waste

To further reduce waste, the researchers also recommended:

  • Addressing the high cost of pharmaceuticals (especially for high-cost specialty drugs).
  • Implementing hospital price transparency.
  • Implementing market competition policies.
  • Improving payer-provider collaboration to reform care coordination, safety and value.
  • Implementing new measures aimed at reducing fraud and abuse.
December 23, 2019

Preventative Care Services Available in All ACA-Compliant Plans

One beneficial change the Affordable Care Act brought about was the complete coverage of preventative care. With all approved insurance plans and Marketplace plans, several preventative services such as shots and screenings are provided at no cost to the policyholder.

Preventative Services For Adults

Marketplace plans and other insurance plans are required to cover a specific range of preventative services. If a policyholder has an annual deductible to meet and has not yet met it, these services are still provided for free. They must be administered by an in-network provider. 

The following list includes covered services:

  • One abdominal aortic aneurysm screening for men of certain ages who have smoked.
  • Blood pressure screenings for adults of all ages.
  • Aspirin for men and women of all ages for prevention of cardiovascular disease.
  • Colorectal cancer screenings for any adults over the age of 50.
  • Cholesterol screenings for adults in specific age and risk groups.
  • Alcohol misuse counseling and screenings for adults of all ages.
  • Diet counseling for adults in risk groups for chronic diseases.
  • Depression screenings for adults of all ages.
  • Type 2 Diabetes screenings for adults who have high blood pressure.
  • HIV and Hepatitis C screenings for adults in specific age and risk groups.
  • Immunizations and booster shots for infectious diseases and viruses.
  • Lung cancer screenings for adults who are at risk.
  • STI prevention counseling for adults who are at risk.
  • Obesity counseling for adults of all ages.
  • Tobacco screenings and cessation services for adults who are tobacco users.
  • Syphilis screenings for adults who are at risk.

Preventative Services For Women

In addition to any applicable services in the previous section, women also receive the following free preventative services:

  • Anemia screenings for pregnant women.
  • Breast cancer mammography every one to two years for women over the age of 40.
  • BRCA counseling and chemo prevention counseling for at-risk women.
  • Breastfeeding support and counseling for nursing women.
  • Chlamydia screenings for young and at-risk women.
  • Cervical cancer screenings for women of all ages who are sexually active.
  • Domestic violence screenings and counseling for all women.
  • Contraceptives and sterilization for women of all ages.
  • Gestational diabetes screenings for pregnant women.
  • Folic acid for women who are or who may become pregnant.
  • Hepatitis B screenings for pregnant women.
  • Gonorrhea screenings for at-risk women.
  • Rh incompatibility screenings for pregnant women.
  • UTI screenings for pregnant women.
  • Osteoporosis screenings for at-risk women over the age of 60.
  • Well-woman visits for women under the age of 65. 

Preventative Services For Children

Children receive a wide array of free preventative services. The following are included in all ACA-compliant policies: 

  • Autism screenings at 18 and 24 months.
  • Blood pressure screenings for children of all ages.
  • Alcohol and drug screenings for adolescents.
  • Behavioral assessments for children of all ages.
  • Immunizations and booster shots for children of all approved ages.
  • Depression screenings for adolescents.
  • Cervical dysplasia screenings for girls who are sexually active.
  • Height, BMI and weight measurements for children of all ages.
  • Dyslipidemia screenings for at-risk children.
  • Hearing screenings for all newborn babies.
  • Developmental screenings for children under the age of three.
  • HIV screenings for at-risk adolescents.
  • Gonorrhea prevention medication for all newborn babies.
  • Iron for children who are at risk for developing anemia.
  • Hypothyroidism screenings for all newborn babies.
  • Oral health screenings for children under the age of 10.
  • Fluoride supplements for children who are deficient.
  • Hemoglobinopathies and sickle cell screenings for at-risk newborns. 
  • Obesity screenings and counseling for children of all ages.
  • Lead screenings for at-risk children.
  • Hematocrit screenings for at-risk children.
  • Medical history for children of all ages.
  • TB testing for children of all ages.
  • PKU screenings for all newborn babies.
  • STI prevention counseling for at-risk adolescents.
  • Vision screenings for children of all ages.

To determine at-risk classifications and specific age groups, check an individual policy. For answers to questions, discuss any concerns with us.

December 17, 2019

Generic Drug Makers Sued over Pricing Practices

One of the country’s largest health insurers has sued a number of pharmaceutical companies, accusing them of running a price-fixing cartel of common generic drugs.

Humana Inc. has accused the companies of colluding on the prices of generics to the detriment of health insurers that have to pay for these drugs. Humana said in its lawsuit that this collusion prevented fair competition among insurers that could have reduced the cost of many of these drugs.

The background

The lawsuit comes after 45 states signed on to a suit last year over an alleged scheme among generic drug manufacturers to fix the price of some 300 medications. The states are seeking unspecified damages for what they say they had to overpay for drugs for Medicaid patients as a result of the alleged cartel. 

Humana accused Teva Pharmaceuticals, the largest generic drug producer in the world, of being the ringleader of the alleged scheme, which fixed, increased or maintained the prices of more than 100 generic drugs.

“They leveraged the culture of cronyism in the generic drug industry to avoid price erosion, increase prices for targeted products, and maintain artificially inflated prices across their respective product portfolios without triggering a ‘fight to the bottom’ among competitors,” Humana wrote in the complaint, which it lodged with the U.S. District Court for the Eastern District of Pennsylvania.

The lawsuit adds to the troubles faced by generic drug companies. Earlier in 2019, a number of states joined to sue drug makers, including Teva Pharmaceuticals. The suit also named multiple executives from Teva and other generic manufacturers as individual defendants. 

An investigation by multiple states led by Connecticut accused generic drug makers of “illegal collusion,” refuting arguments by the manufacturers that price increases were caused by industry consolidation and Food and Drug Administration-mandated plant closures.

Humana says the drug companies conspired to set market shares and customers for each company, and that they also agreed not to compete with each other for those customers so that each company could maintain or raise the price of its generic pharmaceuticals.

This is the second lawsuit Humana has filed against generic pharmaceutical companies. It filed a similar case in August 2018 against a handful of drug makers, accusing them of price fixing. That case listed far fewer drugs than the latest salvo.

Lawsuit highlights industry chasing profits

The generics industry used to be highly competitive, but over the years, things changed and suddenly allegedly “coordinated price hikes on identical generic drugs became almost routine,” the <i>Washington Post</i> wrote in an article last year that covered the alleged scheme and lawsuit by states.

While generics account for 90% of the prescriptions written, they only account for 23% of the total drug spend in the country, according to the Association for Accessible Medicines. Despite that, there has been a noticeable and inexplicable uptick in the price of drugs in recent years, sparking outrage among consumers, health insurers and states that run their own Medicaid programs.

If the allegations are true, the parties affected run the gamut from consumers ― who have high copays or high deductibles for their pharmaceuticals ― to hospitals and insurance companies.

December 10, 2019

New Rules Allow Employers to Reimburse for Health Premiums

Starting Jan. 1, 2020, employers can establish accounts for their employees to help them pay for individual health insurance policies they purchase, as well as for other health care expenses.

A new regulation expands on how health reimbursement accounts can be used. Currently, employers and their workers can contribute to these accounts, which can be used to reimburse workers for out-of-pocket medical expenses.

With these new Individual Coverage HRAs, employers can fund the account workers would use to pay for health insurance premiums for coverage that they secure on their own.

Up until this new regulation, such arrangements were prohibited by the Affordable Care Act under the threat of sizeable fines in excess of $36,000 per employee per year.

This rule is the result of legislation signed into law by President Obama in December 2016, which created the “qualified small employer health reimbursement arrangement (QSEHRA),” which would allow small employers to reimburse for individual insurance under strict guidelines.

The Trump administration was tasked with writing the regulations, which created the Individual Coverage HRA (ICHRA).

How it works

Under the new rule, if an employer is funding an ICHRA, the plan an employee chooses must be ACA-compliant, meaning it must include coverage for the 10 essential benefits with no lifetime or annual benefit maximums — and must adhere to the consumer protections built into the law.

Once the ICHRA is created, the employer will a set amount every month into the account on a pre-tax basis, which the employee can then use to buy or supplement their purchase of health insurance benefits in the individual market.

The law allows employers to set up as many as 11 different classes of employees for the purposes of distributing funds to ICHRAs. The employer can vary how much they give to each different group. For example, one class may get $600 a month per single employee with no dependents, while members of another class may receive $400 a month.

The allowable classes are:

Full-time employees — For the purposes of satisfying the employer mandate, that means a worker who averages 30 or more hours per week.

Part-time employees — Like the above, the employer can choose how to define what part-time is.

Seasonal employees — Workers hired for short-term positions, usually during particularly busy periods.

Temps who work for a staffing firm — These employees provide temporary services for the business, but are formally employed through a staffing firm.

Salaried employees — Staff who have a have a fixed annual salary and are not typically paid overtime.

Hourly employees — Staff who are paid on an hourly basis and can earn overtime.

Employees covered under a collective bargaining agreement — Employees who are members of a labor union that has a contract with the employer.

Employees in a waiting period — This class would include workers who were recently hired and are in their waiting period before they can receive health benefits (in many companies, this is 90 days).

Foreign employees who work abroad — These employees work outside of the U.S.

Employees in different locations, based on rating areas — These employees live outside the individual health insurance rating area of the business’s physical address.

A combination of two or more of the above — Businesses can also create additional classes by combining two or more of the above classes.

The rules for ICHRAs are as follows:

  • Any employee covered by the ICHRA must be enrolled in health insurance coverage purchased in the individual market, and must verify that they have such coverage (as mentioned above, that coverage must be ACA-compliant);
  • The employer may not offer the same class of workers both an ICHRA and a traditional group health plan;
  • The employer must offer the ICHRA on the same terms to all employees in a class;
  • Employees must be allowed to opt out of receiving an ICHRA;
  • Employers must provide detailed information to employees on how the ICHRA works;
  • Employers may not create a class of employees younger than 25, whom they might want to keep in their group plan because they’re healthier;
  • A class cannot have less than 10 employees in companies with fewer than 100 workers. For employers with 100 to 200 employees, the minimum class size is 10% of the workforce, while for employers with 200 or more staff, the minimum size is 20 employees;
  • While benefits must be distributed fairly to employees that fall within each class, each class can be broken down further by age and family size. That means employees with families can be offered a higher amount per month and rates can be scaled by age.
December 5, 2019

Large PBMs Balk at Push to Reduce Drug Prices

In a move that exemplifies the potential conflict of interest that some large pharmacy benefit managers have, the nation’s largest PBM earlier this year said it would demand that rebates remain unchanged when drug makers roll out new price cuts.

Drug makers earlier in the year said they would start reducing prices as well as the rebates they pay PBMs to appease lawmakers and the Trump administration, saying it would reduce the cost of medicine for patients.  

But not long after the announcement, the nation’s largest PBM, United Healthcare, fired off a letter to drug companies telling them that if they planned to reduce prices and rebates they would have to give seven quarters of notice (that’s 21 months if you’re counting) when they intend to lower prices.

The letter, which was confirmed in news reports in the health care trade press, highlights what many critics say is an inherent conflict of interest among some of the large PBMs operating in the country.

Some background

When PBMs first came on the market, the services they offered were processing pharmacy claims and negotiating discounts on medications for the health insurance companies with which they contracted.

Later though, they found a new way to make money: rebates. They would approach two manufacturers that made similar versions of a drug and play them off against each other to elicit the largest rebate they could. Whichever one offered the larger rebate would have their pharmaceutical placed on the drug plan’s formulary.

The problem is that these large PBMs do not pass on the full rebate to their clients, like health insurance companies and health plan enrollees. Instead, they keep most of the rebate for themselves. As a result, PBMs with this business model are not motivated to include the lowest-priced drug on their formulary, but rather the one for which they can receive the largest rebate check.

The latest

United Healthcare sent out the letter to drug makers after pharmaceutical manufacturer Sanofi S.A. said it would cut the price of its cholesterol-lowering drug Praluent by 60%. It did so after its competitor Amgen Inc. reduced the price of its cholesterol drug Repatha by the same amount.

United Healthcare’s demand that drug companies give 21 months’ notice when they plan to reduce prices has caught many drug makers off guard, since many of them have been looking to cut prices as pressure mounts on the industry from Washington.

The dominance of United Healthcare’s PBM OptumRX and its competitor Express Scripts means that group health plan enrollees are often left at their mercy, as many large health insurers have contracts with them.

If a drug company does not give the rebate that a large PBM demands, it could lose access to patients – and patients lose access to that drug. The only way to play the game is to offer a larger rebate and increase prices, which in turn increases the prices that patients have to pay.

Fortunately, there are a number of smaller PBMs in the marketplace that have different business models that take payers’ needs into consideration and aim to reduce the out-of-pocket costs for patients. They contract with employers and insurers directly to make this happen.

November 26, 2019

New Rules Aim for Hospital, Insurer Transparency

The Trump administration on Nov. 15 announced two rules that would require more transparency in hospital pricing and health insurance out-of-pocket costs for enrollees.

The final rule on hospital pricing will require hospitals to publish their standard fees both on-demand and online starting Jan. 1, 2021, as well as the rates they negotiate with insurers. The administration also proposed rules that would require health insurers to provide their enrollees instant, online access to an estimate of their out-of-pocket costs for various services. 

The latter are just proposed rules and will have to go through a comment period before final rules can be issued. 

The two sets of rules are part of the Trump administration’s efforts to bring more transparency into the health care and insurance industry. They are in response to more and more consumers’ stories of serious financial strife after receiving surprise bills from hospitals and other providers, particularly if they had to go to a non-network physician or hospital.

Both rules could benefit health plan enrollees by giving them more information on hospital services, particularly if they are in high-deductible plans and can shop around for a future procedure, such as a mammogram or knee replacement surgery.

Hospital pricing transparency

In the original proposed regulations, the administration had proposed the effective date of the hospital price transparency rule as Jan. 1, 2020, but health providers said they would need more time to ramp up.

The new rules, effective Jan. 1, 2021, will require hospitals to publish in a consumer-friendly manner their standard charges price list of at least 300 “shoppable services,” meaning services that can be scheduled in advance, such as a CAT scan or hip replacement surgery.

The list must include 70 services or procedures that are preselected by the Centers for Medicare and Medicaid Services. Hospitals will have to disclose what they’d be willing to accept if the patient pays cash. The information will be updated every year.

Hospitals will be required to publish their charges in a format that can be read online. This rule could pave the way for apps that patients can use to compare services between hospital systems.

Under the rule, hospitals will have to disclose the rates they negotiate with third party payers.

The new rules face some uncertainty, however. The health care trade press has reported that a number of trade groups such as the American Hospital Association and the Federation of American Hospitals, among others, announced in a joint statement that they would sue the government, alleging that the new rules exceed the bounds of the CMS’s authority.

Out-of-pocket transparency

The proposed rule would require insurers to provide their health plan enrollees with instant online access to estimates of their out-of-pocket costs.

The regulations would require health insurers to create online tools their policyholders can use to get a real-time personalized estimate of their out-of-pocket costs for all covered health care services and products, such as:

  • Hospitalization
  • Doctor visits
  • Lab tests
  • Surgeries
  • Pharmaceuticals.

They would also be required to disclose on a public website negotiated rates for their in-network providers, as well as the maximum amounts they would pay to an out-of-network doctor or hospital. 

The proposed regs would also let insurers share cost savings with their enrollees if the individuals shop around for services that cost less than at other providers. This would give enrollees an incentive to shop around.

This proposed rule is also certain to face push-back from the insurance industry.

These out-of-pocket transparency regs are just proposals, so they have to go through the standard rule-making procedure of soliciting public comments before eventually issuing the final rules.